HR Shop’s big holacratic experiment comes to an end (for now)

Last year, HR Shop decided it would try something a little different with its organisational structure.

Owner/founder Samantha Gadd resolved to ditch traditional ‘top-down’ business management principles and try something new. That something was ‘holacracy’, a business philosophy that obliterates the traditional chain of command and replaces it with group decisions, self-directed employees and a flat management structure.

While companies such as Yammer and Medium have managed to integrate the system into their respective cultures to apparent competitive advantage, other businesses – such as high-profile online shoestore Zappos – have found the ‘distributed authority’ model a little more problematic to implement. (The company has reportedly lost 18% of its staff since this time last year).

None of this indicates the idea is doomed of course – few worthwhile ideas are without their challenges – but it does speak to the difficulties of attempting to implement such a radically novel approach to the tried-and-true of organisational management.

Gadd spoke to Idealog about the difficulties HR Shop have faced attempting to operate according to such egalitarian principles. As of December 2015, the company’s grand experiment in self-management, has, for now, been put on hold.

“At the middle of last year we realised the needs of the business were changing,” says Gadd. “We had had some amazing growth, but our client’s needs were changing and we needed to evolve our strategy.”

Image: Samantha Gadd, founder and managing director of HR Shop

That was when the company ran into problems with the way employment law is written in New Zealand. Just how does one manage the prescriptive and paperwork-heavy process of restructuring when there’s literally no boss?

Gadd says that the obligations and requirements employers have around restructuring, and the inflexible nature of the law, is simply incompatible with holacratic thinking.

“The restructure wasn’t to downsize, but more to reshape and prepare for further growth. The reality is that the business is doing really well, but our needs were changing. When it came time to actually do that restructure however we found the biggest obstacle is New Zealand law.”

“Just because you’ve got a lot of growth doesn’t mean you don’t have to make tough decisions sometimes,” she says. “And under current New Zealand [employment] law, that’s just not possible. You simply can’t do it with a holacratic structure. The process has been a real struggle.”

Gadd says the only option was to put HR Shop’s egalitarian experiment on hold while the changes took place.

“I really struggled with it because, we’d all made this massive commitment, then all of a sudden we’re doing a restructure – which is a very traditional way of doing things – and we just couldn’t make it work.”

So, for now at least, holacracy has been suspended at HR Shop until further notice. But Gadd says her heart is still dedicated to alternative management philiosophies.

“Teal structures," as alternative organisational formats are called, "aren't for everyone,” she says. “Self-organising around a clear purpose is at the core and given we are purpose and values driven we should be able to move closer to teal this year”.

“Because you’re thinking about people’s whole happiness. You’re talking about human beings. It’s definitely not easy, but if anyone can do it, it should be us.”

“I’ve got a really smart team, and there’s got to be a better way to do things than the traditional organisational structure. So yes, the benefits definitely outweigh the effort involved. We’re not a traditional business and we won’t be.”